Two Area Chains Will End Freeze On Food Prices

Safeway and Grand Union supermarkets will end their two-month-old freeze on food prices Monday, despite a flurry of telephone appeals yesterday from White House consumer director Esther Peterson.

Officials of both chains said price increases by their suppliers and higher operating costs make it impossible for them to continue their anti-inflation freezes on house-brand canned goods and staples

"The suppliers are not cooperating -- that is the story I am getting," said Peterson.

The 121 Giant Food supermarkets in the Washington area will keep ceilings on prices at least until Aug. 2, officials said yesterday. A&P representatives said they would continue to freeze prices on fresh meat through May 17.

The voluntary controls on supermarket prices were first imposed in March by more than 20 companies throughout the nation in response to White House requests.

Now that the programs at Safeway and Grand Union are ending, shoppers can expect a fresh round of price increases.

The most likely candidates at Safeway's 130 stores in the Washington area, a representative said, are products containing sugar, such as fruit drinks, jams and jellies, cookies, frozen lemonade, and ice cream. Food industry analysts said this is because the price for refined sugar is now 33 cents a pound in New York markets, up from 22 cents last year. Sugar prices rose because some farmers decided to scale down their crop and others were affected by bad weather.

Produce prices also have surged, the Safeway spokesman said. She said Safeway stores which sell bags of potatoes, oranges and apples under the chain's private label Scotch Buy, may raise prices.

None of the Safeway Scotch Buy prices will be changed "in the next week," however, according to Ernest L. Moore, a spokesman for the chain's Washington area operation. After that, Safeway "will regain the option of passing on our increased costs as we deem appropriate," he said.

Analysts were divided over the effect of the supermarket food freeze programs on consumers.

Willard Bishop, a consultant in Barrington, Ill., said shoppers who purchased house brand merchandise under the freeze programs could realize "quite dramatic benefits."

But George Quint, an analyst with Merrill, Lynch, Pierce, Fenner & Smith Inc. in New York, said it was unlikely the freezes helped consumers much.

He said the freezes spanning two months and covering only about 15 percent of chains-sales volume were too limited to make a difference for consumers.

For the same reasons -- because they're "too short and too small" -- the freezes aren't expected to hurt or help company earnings, Quint said.

"It was done in response to pressure from the White House . . . the industry could have responded negatively . . . instead they froze prices," he said.

In doing that, the chains approached the programs as they traditionally have approached other marketing challenges -- that . . is, they turned the freezes into sales campaigns aimed at increasing their share of the market.

In the Washington area, Safeway and Giant each control about 30 percent of the grocery business.

Because of the strong competition between the two chains, analysts said continuation of the freeze at Giant will help keep prices down at Safeway.

"If one is committed to the freeze, the effect will trickle over to the other," Bishop said.